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Pensions dashboard: Savers to get inflation warning

pensions pot label on british mixed coins inside a glass jar concept concept
Pensions dashboards will allow people to see information about all their pensions in one place. Photo: PA (ACORN 1)

Providers of non-workplace pensions will be required to warn customers about the risk of inflation eroding the value of their savings under new rules.

The Financial Conduct Authority (FCA) is proposing that firms offer non‑advised consumers buying a non-workplace pension (NWP) a default investment option, to support those struggling to make a choice.

Providers can continue to offer wider options for more engaged consumers.

Firms will also be required send a ‘cash warning’ notification to consumers with significant and sustained levels of cash in their NWP to warn them that their pension savings are at risk of being eroded by inflation.

Read more: £26.6bn sitting in lost pension pots as FCA sets out new rules

Firms will have 12 months to implement these rules, but given the current levels of inflation, the FCA is encouraging providers to send cash warnings now.

The financial watchdog has already set out its plans to supervise dashboard operators, including on fees, regulatory reporting, record keeping, prudential requirements and conduct rules.

Pensions dashboards will allow people to see information about all their pensions in one place. It will include all their private pensions, defined benefit or defined contribution, retail or workplace, old or new, as well as any public sector pensions and, importantly, their state pension as well.

“Pensions dashboards will give savers better access to their data, helping them make better decisions for their retirement. Our proposals will encourage innovation while ensuring that we have the right rules in place to protect consumers,” Sarah Pritchard, the FCA’s executive director for markets, said.

Read more: Pension customers struggling to access savings from 'inflexible' providers

Under its proposed framework, FCA regulated pension providers must answer requests to find pensions, and search records for data matches. Providers must also be able to return pensions information to the consumer’s chosen pensions dashboard.

The government committed in 2020 that operators of pensions dashboards should be subject to FCA regulation.

While the government has overall responsibility for pension dashboards, firms will not be able to operate pension dashboards without authorisation from the FCA.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Many people in non-workplace pensions are more than happy to choose their own investments but for those who don’t have this confidence then the use of default funds can help. Choosing investments may act as a barrier to groups such as the self-employed or those looking to consolidate in setting up a pension and so offering a single default fund will aid decision making and improve outcomes.

"It is good to see the FCA has listened to industry concerns and there is flexibility baked into the rules. For instance, the rules still give providers the flexibility to develop further solutions for those who are more confident making investment decisions so those who need the support receive it, while others retain the flexibility to choose. We also welcome the fact that it is not mandatory to adopt a lifestyling approach in these funds if it does not meet the needs of the target market.

"The timing and content of cash nudges is extremely important, especially in these times of high inflation. Holding large amounts of cash long-term can have a disastrous effect on someone’s retirement plans and it is important the appropriate warnings are put in place to make people aware.

"The FCA has given guidelines for what must be included in these warnings -we believe that as data capture and technology improve, we can further innovate in this area with the provision of more dynamic tailored warnings to customers in future."

Watch: When should I start paying into a pension?